Kenya: Bankers Association Opposes Proposed 16% VAT on Financial Transactions
The Kenya Bankers Association (KBA) has urged the Government and National Assembly to reconsider the proposed 16% Value Added Tax (VAT) on financial transactions outlined in the Finance Bill, 2024.
Key Concerns:
- Bank Charges: Raimond Molenje, Acting CEO of KBA, emphasized that bank charges are cost recovery, not direct payments for goods or services, and should not be subject to VAT.
- Affected Services: The bill proposes VAT on services such as:
- Issuance of credit and debit cards
- Telegraphic money transfers
- Foreign exchange transactions
- Cheque handling and processing
- Issuance of securities for money
- Insurance consultancy services
Potential Impacts:
- Increased Costs: The combined VAT and Excise Duty would raise total taxation on financial services to 40%, impacting affordability and accessibility.
- Financial Inclusion: Higher banking costs could hinder efforts to include low-income individuals and small businesses in the financial system.
- Economic Growth: VAT on foreign exchange transactions could reduce the competitiveness of Kenyan products, deter foreign investment, and negatively affect the tourism industry.
- Market Stability: Increased costs could drive transactions to the black market and offshoring of large foreign exchange transactions.
KBA’s Position:
- John Gachora, Chairman of KBA and CEO of NCBA Bank: The introduction of VAT on banking transactions, akin to Tobin and Robinhood taxes, will increase the cost of basic banking services and credit, making Kenya less competitive globally.
Source: kenyanwallstreet.com
